The New York City Budget and the Great Recession: the Uniforms

While the public schools account for the highest total amount of New York City spending overall, with health and social services coming in second, a substantial share of the funding for those services comes from the federal and state governments, not city taxes and fees.  Of the $50.7 billion in “city funds” in the proposed FY 2014 budget, according to the “Budget Summary” document, the four so-called uniformed agencies – police, fire, corrections, and sanitation, account for $16.8 billion.  The Department of Education accounts for $13.9 billion, with $10.6 billion for the health and welfare agencies and $9.4 billion for everything else put together.

 While the Department of Education has been favored at the expense of other public services in this fiscal/pension/debt crisis, the uniformed agencies have been favored in virtually every crisis – the latest being no exception.  While inflation will have increased 11.9% from FY 2008 to FY 2014 (and most people’s wages going up by far less), total city spending will have gone up 20.7% under the FY 2014 budget proposal.  Spending on the four uniformed agencies combined will have gone up even more – by 26.9%, with much of that increase having already happened.  Total New York City personal services spending is projected to have increased 11.8% from FY 2008 to FY 2014, or about the rate of inflation.  The projected increase for the four uniformed agencies combined is 22.3%, or about double, including 26.0% for the NYPD.  And yet the head of the Patrolmen’s Benevolent Association, the Uniformed Firefighters’ Association, and the Uniformed Sanitationmen’s Association show up at City Council hearings each year to tell New Yorkers they deserve less protection, less clean and passable streets, less work overall unless they get even more money.  Why do they make such claims? Unless you are reading my posts for the first time, you know why.

From FY 2008 to FY 2014, total wages and salaries for the four uniformed agencies combined are expected to increase 15.7%, or more than the rate of inflation – even as most New Yorkers were asked to do more work for less in inflation adjusted pay due to the recession.  But there is a difference between the first and second halves of this period.  From FY 2008 to FY 2011, during the worst of the recession for those in the private sector, wages and salaries for the uniforms rose 16.5% compared with an increase of 5.3% for all city agencies and an inflation rate of 4.7%.  But from FY 2011 to FY 2014 as proposed, wages and salaries for the uniformed agencies as a group will have fallen 0.7%, compared with a 1.6% decline for all city agencies and an inflation rate of 6.9%.

Those cash wages confer certain rights on the public employees relative to the rest of us.  When they take them and spend them, they have choices, and can take their business elsewhere if they are not satisfied.  Collectively those with contracts, either in the political/union class or the executive/financial class, have used that right of choice to squeeze down the wages and benefits of everyone else, take it or leave it, to get a better deal for themselves as consumers. 

On the other hand, under current labor laws New York City’s public employees can never get less, only more, at least in nominal dollars.  And that money is taken up front with no choice but to pay, with public services provided, or not, in return afterward.  That is a huge difference in power, choices compared with no choice.  Since there can be no wage cuts in public service (except the real cuts caused by inflation), except for new employees (more on that later), such cuts are not what caused the 0.7% reduction in the total wages and salary paid for the uniformed agencies from FY 2011 to FY 2014.   Instead, wage and salary spending has been reduced by reducing the number of workers.  And that is why the union heads say New Yorkers deserve less work.

Just as in education, moreover, within these agencies the same repeating pattern of more money and pension benefits for those cashing in and moving out, and lower pay and benefits for new hires, may be observed.  With respect to the NYPD and NYFD, taxpayer pension contributions soared by 33.1% and 24.8% from FY 2008 to FY 2014.  Those contributions had already soared before FY 2008.  For the Police Department, taxpayer pension contributions increased from 53.5% of the pay of those on the job in FY 2008 to 59.4% for FY 2014 as proposed.  For the Fire Department the increase was from 62.2% of payroll to 69.8% of payroll.

And, as for the teachers, it is not enough, as yet another report has once again found that the New York City police and fire pensions are drastically underfunded – at 71.3% of needed assets for the NYC police pension fund, and just 54.2% of needed assets for the firefighter’s pension fund.  The latter is now even worse off than the NYC teacher’s pension fund, a few years ago identified as the most underfunded major public employee pension fund in the U.S.

Moreover, while pension funds for teachers are underfunded in much of the U.S., pension funds for police officers and firefighters tend to be well funded – except those for New York some other cities.  And yet the same report claims that NYC taxpayers make 100 percent of their actuarially required contributions each year (or at least they did until last year, when City Actuary Robert North said they no longer had to, presumably under pressure from Mayor Bloomberg and with the connivance of the unions).  So how did the pension funds get so deep in the hole?

First, the police officer and firefighter pensions were generous to begin with, with a half pay pension at any age after just 20 years of work.  According to my own calculations, for a worker who follows the NYPD pay schedule of the time I did the analysis, with no promotions and no pension spiking through late-career overtime, and who retires at age 44 and lives to 80, that pension would have cost 31.0% of payroll – if that amount was deposited each and every year, without exception, so it could earn returns.  With virtually all of it covered by the taxpayer, because in reality almost all of the “employee share” has been covered by other city taxpayers since deals were cut in the early 1960s.

Second, retired police officers received many of the benefits of the 2000 pension deal.  A partial inflation adjustment added to the pensions (including for those long retired, those who had not stopped crime or prevented the city from burning down in the 1970s).  And the shift from a pension based on the final three years of pay, to the final one year of pay, facilitated pension spiking.  Which is why a report from Comptroller John Liu, who was trying to ingratiate himself with the unions by claiming pension spiking may not be happening, made an irrelevant comparison rather than comparing the amount of overtime in the final year before retirement with all the other years.  He still showed far more overtime for those in the late stages of his career.

Third, like the NYC teachers, NYC police officers and firefighters have received a series of post-2000 pension enhancements in excess of those give to other city and state workers.  Generally these have involved giving disability pensions at 75.0% of final pay, rather than the purported 50.0%, if a doctor can be hired who would find one of an ever-growing number of ailments.  Whether or not these have anything to do with the job. 

Now disability pension costs were going to go up anyway as a result all the deaths and disabilities caused by 9/11, and no one has a reason to object to that.  And many police officers and firefighters may choose to remain police officers and firefighters until a disability or workplace injury forces them out, rather than running out the door with the money after the minimum 20 years.  But what the unions and state legislature have done is create a culture of entitlement to pension at 75.0% of pay at 20 years, while pretending to taxpayers that they are only funding a pension at 50.0% of pay after 20 years.  In doing so, they risk creating a situation where only a few honest “suckers” don’t get a 75.0% pension, and the kind of attitude seen on the LIRR where virtually everyone claimed to retire disabled – after working huge overtime to pad their pension in their final year on the job.   And meanwhile, if they chose to pursue it, the press and investigators could probably come up with as many stories like this one as they have the time for.

Regardless of the source, telling taxpayers one thing about what police officers and firefighters get in pensions, while creating loopholes to allow more of them to get far more, has led to severe pension underfunding.  As I noted for the teachers, the only way out at this point is for taxpayer pension contributions to equal pension benefit payouts for years, until the pension funds recover.  And that will mean even more reductions in the number of workers still on the job, and even more such reductions if any wage increases are granted.

Like the United Federation of Teachers, the Patrolmen’s Benevolent Association and the Uniformed Firefighters’ Association, in association with Mayor Bloomberg, have turned to a familiar source to help pay for higher benefits and salaries for those cashing in and moving out. The unions’ future members, and the city’s future workers.  Most notoriously, the starting pay of new police officers and firefighters was once cut by about 40.0%, to just $25,000 per year.

Here is the PBA propaganda for a deal they cut. 

“Now for the parts of the award that are entirely unjustified. The following terms were imposed by the arbitrator over the PBA’s dissent:  1. Unborns – ten less vacation days, starting with the class of July 2008. This component does not affect any incumbent police officer.  2. Range Day – on one of the two required range appearances, must use one vacation day. 3. The rescheduling of certain named days will be changed to Detective Rules (New Year’s Eve, St. Patrick’s Day, Thanksgiving Day, Puerto Rican Day, West Indies Day, and Christopher Street Liberation Day). This component changes the amount of notice that needs to be given on these specific dates and the hours by which the tour can be varied from the officer’s regularly scheduled tour. 4. Five additional rescheduling days (15 days increased to 20 days). If you recall, in the arbitration, there was evidence that the Department only uses 2.5 days on average in the unit.  We have included the new salary schedule in this newsletter, which details the new compensation on each of the salary steps.”

 Whoops! That isn’t the arbitrator award for the contract with the $25,000 starting salary.  That was the contract after, which restored only part of that cut!  They screwed the newbie again!  Here is the PBA, cited in the Daily News, on that $25,000 per year deal.

“These cops – these heroes in training – can barely make ends meet when they are in Police Academy,” said Patrick Lynch, president of the Patrolmen’s Benevolent Association. “It is disgraceful.”  “The $25,100 annual salary is down significantly from the $38,000 earned by NYPD recruits sworn in last July before a new contract between the police union and City Hall lowered the academy pay.  By comparison, the city Sanitation Department pays new hires about $26,000 a year and the starting salary for Parks Department gardeners is $30,630. New bus drivers earn about $35,000 a year.”

When Bloomberg realized the idiocy of what he had done, as the quality, motivation, and even tendency toward criminal behavior of new police recruits got far worse, and tried to increase starting pay, the PBA fought it and tried to get eve more for those cashing in and moving out.  They seem to have scored a partial victory, as the subsequent deal continued to screw the newbies.  Mayor Bloomberg and the PBA had the fig leaf of blaming an arbitrator for those two contracts, as if they had nothing to do with it.  But later, Mayor Bloomberg and the Uniformed Firefighters’ Association cut the same deal without any arbitrator involved.  Which shocked and disappointed me, because so many sons follow fathers into that organization.  What values that deal showed.  (Indeed, what values all these deals show, and not just in NYC labor relations).

In addition to the other screw the newbie provisions, in 2009 then-Governor Patterson vetoed the bill, previously passed annually, to allow new NYC police officers and firefighters to join the more lucrative, 20 and out “Tier 2” pension plan, rather than the “Tier 3” plan imposed during the 1970s fiscal crisis, which (because of subsequent retroactive increases) no one ever retired under.  That theoretically would have required future police officers and firefighters to work for 25 years rather than 20, and lose part of their pension if they also get Social Security, which they do.  Then a year ago, the Tier VI pension plan passed.  Supposedly it did not change the pensions of NYC police officers and firefighters, but some things I have read implied that these had been made more generous than under Tier 3.  But there seems to be no real information out there, available to those who are forced to pay, as to what the current deal is, and how it differs from Tier 3.

My attitude toward the screw the newbie, flee to Florida cycle is the same for the uninformed agencies as it is for the teachers.  Before those who grabbed more favorable deals for themselves get a dime extra in pay, those on the wrong end of the deals should get a higher cash pay level for the non-pensionable part of their careers to fully offset their losses in prior contracts and pension changes.  Total career compensation, including cash pay and pensions, should be equalized.  Fairness!  Even if that would mean a $70,000 starting pay for new police officers and firefighters. “City Hall sought to divide this membership,” the PBA thundered in its 2008 propaganda piece.  They have no idea what such an attempt would really look like.  It would involve a demand to undo the division the unions and its Generation Greed members have themselves put in place, which is what you would get were I in charge.

But this is not what you are likely to get with any of the candidates for Mayor, and their appointees, in charge.  Instead, you are likely to get more in wages and benefits for those cashing in and moving out, and less in wages and benefits for new hires, either with the assistance of an arbitrator associated with the State of New York that has a legislature with similar generational values, or without it.

To me, the combination of high labor costs and low cash pay – and starting pay for new hires in particular – that the unions have scored is a disaster for the delivery of actual public services.   You end up with resentful and unmotivated employees, and the employees others don’t want to hire, who nonetheless cost a hell of a lot of money.  Mayor Bloomberg certainly wouldn’t have agreed to these deals at Bloomberg LLC. 

But unlike the New York City schools, which most agree have not gotten the job done, it’s hard to argue the NYC police, firefighters, or for that matter even the sanitation workers, have not gotten the job done.  Regardless of the threats of union leaders.  Crime is low, response times are reasonable, and the trash gets picked up.  After one large and mishandled blizzard, the snow has even been cleared.  Moreover, I can’t really analyze the staffing levels of the Department of Sanitation and Fire Department in NYC compared with those in other places.  Because many of those other places have volunteer fire departments, private trash collection, and no street sweepers.

But everyplace has police officers.  And most have far fewer.  Even though the NYC street crime rate is now below the U.S. average, the city has 2 ½ times the number of officers relative to population as the national average.  Down from three times the national average.  Is this really necessary?  Are New Yorkers so inherently criminal that an army in blue has to rush in from the suburbs each day to keep us from running amok?  Or do we just have two-officer patrol cars, even in perfectly safe neighborhoods, whereas just about every other police department has one car patrols?  Perhaps one reason the NYPD keeps getting the job done despite fewer officers is that it still has far more officers than it ought to need.

Finally, what about the Department of Corrections?  I don’t know much about it.  I do know former Mayor Koch once called the Correction Officers’ Benevolent Association the most irresponsible of all the unions.  My own view is that the de facto national union of top corporate executives and directors is the most irresponsible and destructive, but I’ll accept Koch’s analysis at least for the city unions. 

Since city residents are committing fewer street crimes, and white collar crimes go unpunished, fewer and fewer people are in the city’s jails.  That means that even if the corrections officers have been getting the same sort of retroactive pension deals, and the union has been engaging in the same sort of “screw the newbie, flee to Florida” cycle as the other unions, the cost of the Department of Corrections has not been exploding.  So there isn’t the same incentive to pay as much attention to it, at least for now.  Perhaps that’s why I haven’t heard press reports of the head of the Correction Officers’ Benevolent Association showing up at City Council hearings and threatening more jail breaks.